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Does your sibling use the family business as an ATM?

On Behalf of | Jul 27, 2018 | Uncategorized

Your father left the business to you and your sibling when he passed away. You divided up the other assets between the two of you — the proceeds from selling the family home, the money from the life insurance policy, etc. — and so you know you both are doing well financially.

That freed you up to run the family business without having to worry about the financial side of things. This doesn’t mean you are irresponsible, though. You work hard and you put the money you make back into the company, trying to help it grow. You know how much it meant to your father and how hard he worked, and you want to build on that legacy.

Your sibling, however, looks at the family business as an ATM. He or she has access to accounts and credit cards, and they get frequent use. Your sibling even takes “business trips” with company funds that are just vacations. As much as you keep putting money into that company, your sibling keeps pulling it out.

Tearing the company apart

Not only can this destructive behavior put a wedge between you and your sibling, but it can tear the company apart. Did you know that a mere 33 percent of businesses that families own actually make it on to that second generation? By the next generation, the statistics are even worse: Just 10 percent of family-owned companies make it that long.

The reasons vary, but part of the problem could be that children do not always share the visions that their parents had. Your father knew what he wanted to do with the company. While you may find yourself taking the same path, it is clear that your sibling is not. This disconnect can lead to mistakes and financial problems that ruin the company long before you get to leave it to your kids.

Teaching children

The problem may be rooted in the way your father taught the two of you about the business. For instance, experts suggest getting young people around the family business very early on in life so that they understand it and develop the ability to run it over time. They also suggest making sure that the kids know it is not just a free ride to a rich, easy lifestyle. If your parents did not give both of you the same exposure and the same lessons, that may account for the difference in how you view the company.

What can you do?

What you can do depends on your legal rights and exactly how ownership got divided between the two of you. Make sure you understand all of the options you have when your inheritance gets threatened.

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